July 1, 2012

The Fatal Flaw in John Roberts' Analysis of the Commerce Clause

Chief Justice Roberts was entirely correct in holding that the Affordable Care Act's individual mandate could be sustained as a tax. But in describing why that was the case, Roberts also revealed a fatal flaw in the section of his opinion that dealt with the Commerce Clause.

Roberts began his Commerce Clause analysis by stating: “Congress has never attempted to rely on that power to compel individuals not engaged in commerce to purchase an unwanted product.” This clever phrasing allowed him to exclude from his claim the gun mandate (as not under “that power”) and the prior mandates requiring shipowners and seamen to buy medical insurance (because they were “engaged in commerce”). Roberts then ruled that the Obamacare mandate went beyond the Commerce Clause, but nonetheless sustained it as within the taxing power.

But Roberts' tax argument actually undermines his argument about the inapplicability of the Commerce Clause. Roberts reasoned that Obamacare really imposes a mandate only on those subject to its tax penalty—which is limited to those who have thousands (probably tens of thousands) of dollars in earned income. What Roberts seems to have missed is that you cannot have earned income without engaging in commerce. (Gift income does not count as earned income subject to this tax).

Thus, Robert’s own tax reasoning means that the Obamacare mandate applies only to those who are engaged in significant commerce; in other words, the health care mandate was never being applied to people who were “not engaged in commerce,” the criterion so central to his Commerce Clause analysis. Since the insurance mandate regulates only those who are indeed engaged in significant commerce, it ought to fit easily within Roberts' own reading of the Commerce Clause.

But later in his opinion, Roberts does something sneaky. Although his textual reading of the Commerce Clause and his claim about lack of precedent both turned on the claim that the mandate applied to someone engaged in no commerce at all, he later writes that the main problem was that “most of those regulated by the individual mandate are not currently engaged in any commercial activity involving health care.”

But why did he introduce this new criterion? It's certainly not justified on the basis of precedent. The shipowners and seamen who in the 1790s were required to buy medical insurance were not engaged in any commercial activity involving health care; it was their engagement in shipping and seamen labor that was used to justify their health insurance mandate. Moreover, in the Obamacare case, the challengers implicitly conceded the constitutionality of Obamacare’s employer mandate, which requires all sorts of employers who are not engaged in the health care market to buy health insurance for their employees.

In any case, it is easy to cite many other precedents that violate Roberts' claim that people engaged in one market cannot be forced to buy in another market. Federal law sometimes requires employees to pay fees for union representation even if they do not want that representation and are not engaged in the representation market. Federal law requires corporations to hire independent auditors even though the corporation was not in the audit market. Federal law requires unions to buy insurance bonds even though the union was not previously in the insurance market.

In short, Robert’s analysis could be said to be reasonable in its claim that people engaged in no commerce could not be forced to buy something. But that claim does not apply to Obamacare. One senses that Roberts himself knew this; that would explain why, later in his opinion, he shifted his position, to claim that people who are engaged in commerce can only be forced to buy in the markets in which they are already engaged. But that proposition is not supported by text, history, precedent, or any other analysis that Roberts provided.

Einer Elhauge is a professor at Harvard Law School, founding director of the Petrie-Flom Center in Health Policy, and editor of The Fragmentation of U.S. Health Care—Causes and Solutions (Oxford University Press 2010).